Does the Beauty Bungalows Franchise Agreement allow for any exceptions to the non-compete covenants?

According to Beauty Bungalows's 2025 Franchise Disclosure Document, there are limited exceptions to the non-compete covenants. During the term of the Franchise Agreement and for two years after its expiration, termination, or approved transfer, franchisees and their owners are restricted from participating in any Competitive Business. This restriction applies within any state where Beauty Bungalows or its franchisees operate, and within a 20-mile radius of the franchisee's Protected Territory or any Beauty Bungalows Studio. It also extends to the Internet and any multi-area marketing channels used by Beauty Bungalows.

However, the agreement specifies one exception regarding stock ownership. An active officer or a family member of the franchisee can own up to a total of five percent of the stock of any company subject to the reporting requirements of Sections 11 or Subsection 14(d) of the Securities and Exchange Act of 1934. This exception allows for minor investments in publicly traded companies, even if those companies might be considered competitive.

This limited exception provides a small degree of flexibility for franchisees and their families to invest in other businesses without violating the non-compete agreement. However, it's crucial for prospective franchisees to understand the scope and limitations of the non-compete, especially the broad definition of "Competitive Business" and the geographic restrictions, to avoid potential legal issues.